How Do I Reconcile a Bank Statement?

Bank reconciliation ensures that financial records align with bank transactions. This process compares two sets of records to identify and correct discrepancies. Its purpose is to verify cash balances, detect errors, and uncover unauthorized transactions, contributing to sound financial health. Consistent reconciliation maintains financial reporting integrity and provides a clearer picture of available funds.

Gathering Necessary Information

Gathering financial documents is necessary before reconciliation. The bank statement, a summary of all transactions for a specific period, typically arrives monthly or is accessible online. It details the beginning balance, deposits, withdrawals, service charges, interest earned, and ending balance.

Your personal checkbook register or accounting ledger is also important. This record tracks dates, descriptions, and amounts for checks, deposits, and other transactions. An up-to-date ledger provides the internal record for comparison.

If applicable, the previous month’s reconciliation report is useful. This report helps identify outstanding items from the prior period, such as uncleared checks or deposits in transit. These documents facilitate accurate reconciliation.

Step-by-Step Reconciliation Process

Begin by comparing deposits on the bank statement with those in your personal register. Mark off each deposit that appears on both records. Any deposits in your register not yet on the bank statement are “deposits in transit,” meaning the bank has not yet processed them.

Next, compare all withdrawals and payments, including checks, debit card transactions, and automated clearing house (ACH) payments, from your register against the bank statement. Mark off each transaction that matches. Any checks written from your register not yet on the bank statement are identified as “outstanding checks.”

Review the bank statement for transactions initiated by the bank that may not yet be in your personal records. These can include bank service charges, monthly maintenance fees, interest earned, or direct deposits and automated payments. Add or subtract these items from your register balance to reflect these bank-recorded events.

Examine both your register and the bank statement for any errors. Common errors in a personal register can include incorrect amounts, transposed numbers (e.g., writing $32 instead of $23), or duplicate entries. Adjust your register to correct any mistakes.

To adjust the bank statement balance, begin with its ending balance. Add any “deposits in transit” identified earlier. Then, subtract all “outstanding checks.”

Adjust your register balance. Start with its ending balance. Add any interest earned noted on the bank statement and subtract any bank service charges or other debits not previously recorded. Correct any errors found in your register.

Finally, compare the adjusted bank statement balance with the adjusted register balance. If all steps have been performed accurately and all discrepancies identified and corrected, these two adjusted balances should now perfectly match. This matching confirms the successful reconciliation of your records with the bank’s.

Resolving Unidentified Differences

If the adjusted bank balance and your adjusted register balance still do not match, re-add and re-subtract all adjustments. Simple calculation errors are a common source of differences.

Review all marked items to ensure no transaction was overlooked or incorrectly matched. Scan for transposition errors, where digits are swapped (e.g., $54 instead of $45), as these errors often result in a difference divisible by nine.

Check for transactions missed or entered twice in your register. Verify that the current reconciliation’s beginning balance matches the previous month’s ending adjusted balance. For very small, persistent differences, consider minor unrecorded bank charges or rounding errors. If a discrepancy strongly points to a bank error after your review, contact your financial institution.